Excerpt:sales tax - deduction - section 2 (14) of bombay sales tax act, 1959 and section 2 of central sales tax act, 1956 - whether respondent entitled to deduction of cartage and transport charges from turnover of sales under contract between it and housing commissioner - parties not agreed that amount of cartage be separately charged by respondent - held, respondent not entitled to said deduction. - .....'turnover of sales' as follows : ''turnover of sales' means the aggregate of the amounts of sale price received and receivable by a dealer in respect of any sale of goods made during a given period after deducting the amount, if any, refunded by the dealer to a purchaser, in respect of any goods purchased and returned by the purchaser within the prescribed period.' 5. thus, the turnover of sales is the aggregate of the sale price received and receivable by a dealer for any particular period after deducting there-from the amount refunded by a dealer to the purchaser as provided in the said clause (20). the decision to the question submitted to us, therefore, turns upon the true meaning of the term 'sale price'. that term too has been defined in the bombay sales tax act, 1953, the.....

Judgment:

Madon, J.

1. This is a reference under section 34(1) of the Bombay Sales Tax, 1953, made at the instance of the Commissioner of Sales Tax. The question which has been submitted to us in this reference is :

'Whether, on a true and proper interpretation of the contract between the respondent and the Housing Commissioner and the provisions of section 2(14) of the Bombay Sales Tax, 1953, and having regard to the facts and circumstances of the present case, the Tribunal was justified in law in coming to the conclusion that the respondent was entitled to have a deduction of cartage and transport charges shown and recovered by him separately in his invoices from the turnover of sales determined for the periods under assessment ?'

2. The facts which have given rise to this reference are that the respondent-firm carries on the business of manufacturing bricks. The respondent-firm had entered into a contract with the Housing Commissioner, Bombay, of the Maharashtra Housing Board for the supply of bricks, the terms of which contract have been recorded in the undated letter of acceptance from the Housing Commissioner to the offer made by the respondent-firm by its letter dated 7th November, 1958. Under the said contract the respondent-firm had to supply to the Housing Commissioner 50,00,000 kiln burnt bricks at the rate of Rs. 48 per 1,000 bricks 'inclusive of all taxes, etc.' The said contract further provided as follows :

'(i)(a) You will supply the 50,00,000 numbers kiln burnt bricks and deliver at any of the sites of the Board's works anywhere in the area of Greater Bombay lying between the lines Parel-Worli in the South and Ghatkopar-Goregaon in the North of Bombay at the rate of Rs. 48.00 per 1,000 numbers inclusive of all taxes, etc.

(b) The above delivery will be given at the sites of the Board's works and unloaded at a point as far as the motor lorry can ply. You will not be required to construct any approach road to the site at your cost for playing the lorries.

(ii) The Board will advance to you an amount of Rs. 50,000.00 (Rupees fifty thousand only) in two instalments, the first instalment to be paid to you before the end of December, 1958, and the second instalment to be paid to you before 28th February, 1959. The first instalment would be for an amount of Rs. 20,000.00 (Rupees twenty thousand only) and the second for Rs. 30,000.00 (Rupees thirty thousand only).

(iii) The Board will make payments for the bricks supplied as soon as they are delivered and without the least delay, after deducting an amount of Rs. 1,500.00 for every one lakh bricks, towards the recovery of the advance paid to you till the amount of advance is fully recovered by the Board.'

3. While submitting their invoices to the Housing Commissioner the respondent-firm splitted up the said rate of Rs. 48 per 1,000 kiln burnt bricks into two items, namely, Rs. 33.60 as the price of 1,000 bricks and Rs. 14.40 as the cartage for 1,000 bricks. The Housing Commissioner made payment of the amounts of the invoices submitted by the respondent firm without raising any objection to the splitting up of the price as aforesaid. In its assessment for the assessment periods 1st April, 1958, to 31st December, 1959, 1st April, 1959, to 31st December, 1959, the respondent-firm contended that the amount Rs. 14.40 per 1,000 bricks charged as cartage in the invoices submitted by the respondent-firm should not be included in its turnover of sales. This contention of the respondent-firm was rejected by the assessing authority as also by the Assistant Commissioner in appeal and by the Deputy Commissioner in revision. In further revision to the Sales Tax Tribunal, however, the Tribunal accepted the contention of the respondent-firm and held that the respondent-firm was entitled not to include in its turnover of sales the aggregate amount charged in the respondent-firm's invoices as cartage charges.

''Turnover of sales' means the aggregate of the amounts of sale price received and receivable by a dealer in respect of any sale of goods made during a given period after deducting the amount, if any, refunded by the dealer to a purchaser, in respect of any goods purchased and returned by the purchaser within the prescribed period.'

5. Thus, the turnover of sales is the aggregate of the sale price received and receivable by a dealer for any particular period after deducting there-from the amount refunded by a dealer to the purchaser as provided in the said clause (20). The decision to the question submitted to us, therefore, turns upon the true meaning of the term 'sale price'. That term too has been defined in the Bombay Sales Tax Act, 1953, the definition being contained in clause (14) of section 2 of the said Act. The said clause (14) provided as follows :

''sale price' means the amount of valuable consideration payable to a dealer for the sale of any goods, less any sum allowed as cash discount according to trade practice, but including any sum charged for anything done by the dealer in respect of goods at the time of or before delivery thereof, other than the cost of freight or delivery or the cost of installation when such cost is separately charged.'

6. Thus, under the said clause (14) the amount of valuable consideration which a dealer is entitled to receive from his purchaser under the contract of sale is the sale price. An item which is expressly to be excluded from the sale price by the terms of the said clause (14) is any sum allowed as cash discount according to trade practice. Under the said clause (14), however, if a dealer has to do anything in respect of the goods at the time of or before delivery thereof, any sum charged by him in respect thereof is to be included in the sale price except in the one case provided for in the said clause, namely, the cost of freight or delivery or the cost of installation when such cost is separately charged. If the cost of freight or delivery or the cost of installation is not separately charged, it would be included in the sale price payable to a dealer. The submission on behalf of the respondent-firm was that by reason of splitting up in their invoices of the price of Rs. 48 per 1,000 bricks mentioned in the contract into two items, namely, Rs. 33.60 as the price of 1,000 bricks and Rs. 14.40 as the cartage for 1,000 bricks, what the respondent-firm has done was to charge separately for the cost of freight and as such the aggregate amounts of cartage are not to be included in the sale price payable to the respondent-firm. Before, however, a dealer can separately charge his purchaser for any particular item there must be a right in the dealer to make such a charge and a liability on the part of the purchaser to be so charged. This right and the corresponding liability can only be a matter of contract between the seller and the buyer. If it is not a matter of contract, then there is no right in a seller to raise a separate charge against the purchaser nor any corresponding obligation on the purchaser to make payment of the amount so separately charged. If we turn to the contract between the parties we find that the price which the parties have agreed upon is an all-inclusive price. Under the said contract it is clear that the delivery has to be effected by the seller, namely, the respondent-firm, at the various sites where the construction work of the Maharashtra Housing Board is taking place. Thus, the payment of freight is necessarily involved in the execution of the said contract. Since the various sites where the work of the Housing Board is taking place are situate in various localities, the amount of freight which would have to be paid in respect of delivery of each consignment would vary from site to site. In order not to leave the final price contingent either upon the varying freight dependent upon the distance travelled in order to effect delivery or dependent upon the increase in the rate of freight, the price provided for in the contract is an all-inclusive price, namely, the rate of Rs. 48 per 1,000 kiln burnt bricks. This position is made expressly clear in the contract when it is stated in the contract that this rate per 1,000 kiln burnt bricks is 'inclusive of all taxes, etc.'. The purchaser, namely the Housing Commissioner of the Maharashtra Housing Board is not concerned under this contract with the amount which the seller, namely, the respondent-firm, would have to pay by way of freight charges nor is he concerned with the amount of freight which the respondent-firm may be called upon to pay or may be liable to pay. It is true that in their invoices the respondent-firm have made a separate charge in respect of the amount of freight; but as there was no right in it under the terms of the said contract to charge separately for the freight nor any obligation upon the Maharashtra Housing Board to be so charged, the respondent-firm was not entitled under the contract to make such a separate charge. It has obviously done so when in course of time it realised that under the terms of the said contract it was liable to pay sales tax or general sales tax or both on the full amount of the sale price, namely, the amount of Rs. 48 per 1,000 bricks, and in order, therefore, to attempt to take an advantage of that part of the said clause (14) of section 2 of the Bombay Sales Tax Act, 1953, which excludes from the sale price the cost of freight or delivery when such cost is separately charged.

7. It was urged on behalf of the respondent-firm by Mr. B. C. Joshi that since the Housing Commissioner had raised no objection to splitting up the said Rs. 48 per 1,000 bricks into two items as aforesaid, it must necessarily follow that the contract between the parties was subsequently varied. There is, however, no plea of variation of the original contract between the parties at any time taken up by the respondent-firm nor is any such variation of the contract found as a matter of fact by the Tribunal. The mere acquiescence on the part of the Housing Commissioner to splitting up the rate of Rs. 48 per 1,000 bricks into the two aforesaid items after the contract has been executed or executed partly in respect of the quantity covered by each invoice cannot mean that the terms of the contract between the parties were varied as aforesaid. After all, under the invoices what the respondent-firm was charging the Housing Commissioner was a total sum of Rs. 48 per 1,000 bricks and the Housing Commissioner might not have cared in what manner the respondent-firm splitted up that rate in order to gain an advantage in its tax matters.

8. We are fortified in the view we have taken by a decision of the former Nagpur High Court in Commissioner of Sales Tax, Madhya Pradesh v. Anwarkhan Mahboob Co. [1956] 7 S.T.C. 197.. In the said case the contract provided for a rate 'f.o.r. destination'. The seller, however, despatched the goods 'freight to pay' and, consequently, the purchaser paid the freight separately to the railway company. The net amount billed by the seller to the purchaser excluded the amount of railway freight so paid. The question which arose was whether in those circumstances the cost of railway freight could be considered as separately charged for the purpose of the definition of 'sale price' contained in section 2(h)(i) of the C.P. and Berar Sales Tax Act, 1947, which definition was in all material respects the same as the definition of 'sale price' contained in clause (14) of section 2 of the Bombay Sales Tax Act, 1953. The Nagpur High Court held that if the parties to a sale transaction agree that the cost of freight or of delivery or of installation should be paid should be paid for separately, that cost should not form part of 'sale price' and that if, on the other hand, the parties agree that the 'sale price' should be an all-inclusive price, that is, that the purchaser must bear all the costs up to the stage of installation of the goods, purchased and on the responsibility of the seller, the legislature intended to include all those charges in the 'sale price', and it accordingly answered the question in the negative. This decision was followed by the Madhya Pradesh High Court in Birla Jute . v. Commissioner of Sales Tax, Madhaya Pradesh, Indore ([1972] 29 S.T.C. 639.), in which a similar question arose for the determination of the court with reference to the definition of 'sale price' contained in clause (h) of section 2 of the Central Sales Tax Act, 1956, which is the same as the definition contained in clause (14) of section 2 of the Bombay Sales Tax Act, 1953.

9. Our attention was also drawn to certain other authorities. They, however, turn upon the wording either of rule 5(1)(g) of the Madras General Sales Tax (Turnover and Assessment) Rules, 1939, or rule 11(2) of the Central Sales Tax (Registration and Turnover) Rules, 1957, or rule 6(1)(g) of the Andhra Pradesh General Sales Tax Rules, 1957, or rule 6(4)(f)(i) of the Mysore Sales Tax Rules, 1957, none of which are the same as the definition which we have to construe and, therefore, in our opinion, do not afford any aid to us in determining the question before us.

10. In the circumstances, we hold that since the parties had not agreed that the amount of cartage or freight should be separately charged by the respondent-firm to the Housing Commissioner, the respondent-firm was not entitled to split up the all-inclusive rate of Rs. 48 per 1,000 bricks into two items, one for the price of the goods and the other for the cost of cartage and, therefore, the sale price payable to the respondent-firm was Rs. 48 per 1,000 bricks and not Rs. 33.60 per 1,000 bricks.

11. Though the question arose in two assessment periods, the particular Sales Tax Reference which we have decided relates only to the period 1st April, 1959, to 31st December, 1959, and we answer the question submitted to us in the negative and hold that the respondent-firm was not entitled to a deduction of the cartage and transport charges shown and recovered by it separately in its invoices from the turnover of sales determined for the said period.

12. The respondent-firm will pay to the applicant the costs of this reference.